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Growth plans

Soon to take over as chief executive of West Bromwich, Stephen Karle plans to build on the society’s history of organic growth, says Barney McCarthy

Karle is all too aware of the task in front of him.

“We’ve had a fantastic year results-wise and rarely do you have a handover when everything looks so good,” he says. “Normally you pick things up when they are on the slide. Andrew is one of the biggest characters in the industry and loved by the employees so taking over is going to be a tall order.”

Karle joined West Bromwich in 1995 as secretary to the society having previously worked as a solicitor at a law firm in the area. The company was known as Lyon Clark during Karle’s time there but now operates under the name of Challinor’s. Among the solicitor’s clients was local football team West Bromwich Albion and the building society.

Karle was poised to join a legal practice in Birmingham before being approached by the then chairman of West Bromwich John Baker to “have a go at the sharp end”. On joining the building society, Karle became the first solicitor at a senior level in its 150-year history.

After his first position at West Bromwich as secretary to the society, Karle was appointed to the board on January 1 2000 and given additional responsibility for business risk, compliance, efficiency and IT. In 2004, he was promoted to operations director, picking up more responsibilities including sales, marketing and distribution, business operations, recruitment and development.

Although Karle has been with West Bromwich for 11 years in a variety of roles he was by no means a shoo-in for the chief executive position when Messenger revealed his plans to retire.

“Some say I was a natural choice but our board is proper when it comes to corporate governance,” he says. “Our chairman advises foreign governments on the subject and was a senior partner of Pricewaterhouse-Coopers on its global board. It was a rigorous process and an international firm of headhunters was involved. As well as internal candidates, there were 20 from outside the organisation.”

The period between now and October should see a gradual handover period until the reins are formally relinquished.

One of Karle’s main challenges is to continue to help West Bromwich grow at the rate it has been. The past financial year saw the building society process almost 1bn of intermediary lending and it has set itself a target of 1.5bn next year. West Bromwich has also seen growth of 23% in the past year, comfortably above the 10.8% average growth rate of the top 10 building societies. Gross lending was also up 18% to 2.2bn, so as well as the challenge of taking over from Messenger Karle has some pretty impressive figures to maintain.

Westbromforintermediaries, the society’s specialist lending arm, is undoubtedly going to be integral in meeting the targets. It did 76% of its business through intermediaries this financial year and continued investment in its online trading capability should see this percentage increase. The website gives brokers the ability to submit buy-to-let applications electronically, obtain immediate decisions, generate Key Facts Illustrations and obtain rate information.

Karle is keen to emphasise that direct business remains important to West Bromwich.

“Our direct business is still about three times above target,” he says. “We still have 50 branches and the channels complement each other.”

But despite Karle’s assertion that direct business is important there’s no doubt that the broker channel is where real growth plans lie. Although there is no suggestion that West Bromwich will cut back its direct proposition, neither is it in a hurry to grow business that way.

“My main target this year is to expand distribution,” Karle says. “To build direct distribution is a mug’s game because it means heavily structured costs. Setting up quality relationships with brokers allows us to grow our distribution capability infinitely if products and service are right.”

Another way West Bromwich has diversified its distribution is through the acquisition of mortgageforce. Karle is keen to emphasise that the franchised broker remains independent and West Bromwich does not put any pressure on it to drive business its way.

“Buying mortgageforce was more about diversification than growth,” he says. “It gives us market information, sophisticated understanding and another way of generating revenue. Mortgageforce managing director Rob Clifford has a lot to offer the group with his knowledge and market awareness.”

Karle wants West Bromwich’s growth to be organic rather than through mergers.

“We have been around for 157 years which makes us one of the oldest building societies,” he says. “We have grown to be one of the top 10 mutuals but have never merged with another society. Nationwide has probably had about 150 mergers or acquisitions over the same period. We must be the only big player that hasn’t followed that path.”

West Bromwich made tentative steps into the sub-prime sector earlier in the year but this is still in the pilot stage. Karle wants all systems in place to be perfect before making a proper entry into the sector.

“We want to do with sub-prime what we have done with buy-to-let in the past 12 months,” he says. “We have come from nowhere in that sector and are now a serious player. In sub-prime speed of decision is important so we want straight-through online processing in place as well as efficient underwriting.”

Karle has a great belief that his product development team of Paul Marland, assistant general manager of intermediary sales, Chris Miller, assistant general manager of lending, and James Taylor, mortgage product manager, can deliver the goods.

Karle sees general insurance as another sector not fully exploited.

“We have great expertise in general insurance and have a tie arrangement with Norwich Union,” he says. “We earned 6.7m commission this year. The need for intermediary advice in the sector has grown as the Financial Services Authority won’t allow products to be lumped with mortgages anymore.”

Karle is keen to explore other ways of strengthening relationships with brokers and suggests that structured and investment bonds have potential.

“Many mortgage brokers have customers with savings requirements and bonds remain an untapped market,” he says. “The sector is FTSE-related and has a guaranteed return. This is a way intermediaries could add an extra dimension to their businesses.”

Coming from a legal background, Karle never saw the regulation of the mortgage market as a problem or a threat.

“Being a lawyer by trade I’m enjoying it,” he says. “I can understand the frustration of smaller intermediaries in spending time and money on things they didn’t have to before, but you can see that regulation has raised standards across the industry.”

As well as getting across the message of how important broker business is to West Bromwich, Karle is proud of the innovative approach that the society tries to take with all elements of its business. It won the European Quality Model award for the Midlands area three years ago for the development of its staff. And Karle is keen for it to compete for the UK award too – this year West Bromwich was a finalist.

“The fact that a small company from this country’s second most deprived borough made it to a short list that included BMW, Siemens and Ricoh shows that we are trying to do something a bit different.”

Part of Karle’s passion for West Bromwich comes not only from having worked in the area for his entire career but also from being born in Solihull. He enjoys hill and fell walking and also opens the bowling for the society’s cricket team. Karle recently married this hobby with his working life, as West Bromwich signed a shirt sponsorship deal with Warwickshire Cricket Club.

The chief executive designate also supports West Bromwich’s football team which makes for an interesting life as the side yo-yos between the Premiership and the Championship. With Karle assuming Messenger’s mantle in October, he will certainly be hoping for more consistency than the Baggies have shown on the pitch. And given the society’s strong results over the past couple of years, there’s nothing to suggest its success won’t continue.

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